Economic Calendar - Top 5 Things To Watch This Week

© Reuters. Top 5 things to watch this week in financial markets

Investing.com - Global trade tensions and geopolitics could hang over the market in the coming week, as investors assess the fallout from the contentious Group of Seven (G7) summit held in Canada over the weekend, at which U.S. President Donald Trump threatened to stop trading with countries that do not reduce barriers to American exports.

An unprecedented meeting between Trump and North Korea's leader Kim Jong Un scheduled for Tuesday in Singapore will also keep investors on edge.

This week also marks a busy one for central bank meetings.

The Federal Reserve is widely expected to announce an interest rate hike in its post-meeting statement on Wednesday and investors will be watching for signals from the U.S. central bank on its plans for the rest of the year.

Markets are also keeping an eye on Europe amid widespread speculation the European Central Bank could signal intentions to start unwinding its massive bond purchasing program when it holds its policy meeting on Thursday.

Meanwhile, in Asia, a monetary policy announcement from the Bank of Japan will be in the agenda, though no change is expected.

Elsewhere, a Brexit bill vote on Tuesday could inject more volatility in the market as the process enters a potentially critical phase. Britain's parliament votes on Tuesday on amendments to the government's European Union withdrawal bill.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. Fallout From G7 Meeting

Escalating trade rhetoric will keep investors on their toes after President Donald Trump refused to endorse a G7 declaration calling for a reduction of tariffs, as he continued to lash out at traditionally close allies for allegedly treating the United States unfairly.

Trump said on Saturday he had instructed his representatives not to endorse the G7 communique and that his administration was considering imposing tariffs on automobiles, further raising the specter of a trade war that has unnerved Washington's top allies.

After departing, Trump said the U.S. has "put up with trade abuse for many decades — and that is long enough."

Earlier reports had indicated that the U.S. had endorsed the G7 statement, but Trump subsequently posted a message on Twitter slamming Canadian Prime Minister Justin Trudeau's press conference held after the summit.

During his press conference, Trudeau said Trump's move to impose tariffs on Canadian steel and aluminum for national security reasons was insulting to Canadians who had stood with the U.S. in times of war for generations.

The U.S. last week imposed 25% tariffs on steel and 10% tariffs on aluminum imported from the European Union, Canada and Mexico, after temporary exemptions expired.

The tariffs prompted swift retaliation and raised doubts about whether the administration will be able to reach a near-term agreement with Canada and Mexico on a revamped North American Free Trade Agreement.

Trump has repeatedly threatened to pull out of NAFTA if the agreement is not renegotiated in way that he views as more favorable for U.S. companies and workers.

However, the bigger question is whether the U.S. can resolve trade disputes with China. Markets have been on edge over trade tensions potentially triggering a trade war between the two largest economies in the world.

2. Trump-Kim Summit

U.S. President Donald Trump and North Korean leader Kim Jong Un are expected to land in Singapore on Sunday within hours of each other in advance of a historic summit over the reclusive country's arsenal of nuclear weapons.

The unprecedented meeting comes after weeks of sometimes-contentious discussions and was briefly canceled amid North Korean outrage over messaging from some U.S. advisers.

At stake at the summit are North Korea's nuclear weapons and peace on the Korean Peninsula.

Many experts remain skeptical Kim will ever completely abandon his nuclear programs. They believe his latest engagement is aimed at getting Washington to ease crippling economic sanctions that have squeezed the impoverished country.

For Trump, a successful summit will see him achieve badly needed kudos on the international stage ahead of congressional elections in November.

3. Federal Reserve Rate Decision

The Federal Reserve is almost certain to raise interest rates by a quarter point for a second time this year at the conclusion of its two-day policy meeting at 2:00PM ET (1800GMT) on Wednesday.

That would put the fed funds target range in a range between 1.75%-2.0%, inching closer to a neutral policy stance.

Fed Chair Jerome Powell will hold what will be a closely-watched press conference 30 minutes after the release of the Fed's statement, as investors look for fresh clues on how he views inflation trends and the economy and how that will impact the pace of monetary policy tightening for the remainder of the year.

Another issue to watch will be Powell's assessment of the growing external risk from an increasingly long list of sources, including a global trade war, and recent signs of emerging market turmoil.

The U.S. central bank will also release new forecasts for economic growth and interest rates, known as the "dot-plot". The question is whether its rate hike projections - three moves both this year and next - move up and whether it expects to hit the so-called neutral interest rate quicker than earlier thought.

The probability of four total rate hikes in 2018, rather than the three currently forecast by the Fed, have strengthened recently amid signs of rising inflation and strong economic growth.

Besides the Fed, this week's calendar also features top-tier U.S. data on inflation, retail sales, producer prices, industrial production as well as a survey on manufacturing conditions in the New York area.

4. European Central Bank Policy Meeting

In what has become one of the most keenly anticipated meetings in a long time, the European Central Bank (ECB) is likely to signal on Thursday that its €2.5 trillion easing program will end this year, a key move in dismantling crisis-era stimulus.

An announcement is due at 1145GMT (7:45AM ET) on Thursday, with a press conference by President Mario Draghi scheduled for 45 minutes after the policy decision.

Traders piled into the euro last week after hawkish comments from ECB Chief Economist Peter Praet fueled expectations that the central bank will reveal more about its plans for exiting its aggressive quantitative-easing program at its upcoming meeting.

Investors had initially expected the central bank to wait until its July meeting to begin making such decisions. But policymakers recently suggested they will look past Italy's political problems and are ready to debate when to end bond purchases.

The euro zone economy has been growing for over five years, employment is at a record high, wage inflation is increasingly clear and bond purchases have done all they could to cut borrowing costs, making ending the scheme the logical next step.

The market is now pricing in an about 90% chance of rate rise in July 2019, compared with a few weeks ago, when a hike in October 2019 was considered the most likely outcome.

5. Bank Of Japan Policy Announcement

The Bank of Japan (BoJ) is seen keeping policy on hold at the conclusion of its two-day rate review on Friday, including a pledge to keep short-term interest rates at minus 0.1%.

BoJ Governor Haruhiko Kuroda will hold a press conference afterward to discuss the decision.

Kuroda has previously said the central bank will telegraph to markets how it plans to exit from ultra-easy policy when conditions for hitting its price goal become robust.

There have been some indications recently that the BoJ is setting the ground to begin discussions on winding back its quantitative easing program due to the rising costs of the stimulus program.

However, consumer prices have risen more slowly than the BoJ had hoped, as companies hold off on raising prices and wages.

Stay up-to-date on all of this week's economic events by visiting: http://www.investing.com/economic-calendar/